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Tata Capital > Blog > Loan for Business > How to Apply for a Business Loan if You Are an LLC?

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How to Apply for a Business Loan if You Are an LLC?

How to Apply for a Business Loan if You Are an LLC?

A Limited Liability Company (LLC), referred to as a Limited Liability Partnership (LLP) in India, is a type of business wherein the members have limited personal liability for the company’s actions or debts. For instance, when the owners opt for a business loan for the LLC, they are not personally held responsible for loan repayment; the LLC will face legal consequences if the loan isn’t repaid on time.

As a business owner, it is not uncommon to find yourself in cash strapped situations. A loan helps you mitigate the ebbs and flows, and keeps your business running despite financial obstacles. Here’s how you can finance your LLC.

First Things First: Draft a Resolution

Most business loan lenders mandate a resolution formed by all the members of the LLC. The loan would be a collective responsibility of the members. Thus, resolutions are extremely important when it comes to applying for loans for LLC.

The resolution drafted by the members should hold all the key details like the maximum amount of money that can be borrowed, interest rates, terms of repayment, how the business loan is secured, etc. For instance, if the LLC has applied for a line of credit, the resolution drafted in this case should contain the details of the cap on the amount of money that can be used by all the LLC members without approval.

Other crucial details to be mentioned in the resolution include the limits on the money used per transaction, the period of time for which the loan amount can be used or the number of transactions that can be facilitated. Along with the resolution, a promissory note which explicitly outlines the terms of the business loan is unequivocally necessary.

Additional Read: How to Get a Loan to Start a Business in India

LLC Loans

Traditional LLC Loans:

Traditional banks offer LLC loans; however, the process is quite tedious. These lenders have strict eligibility requirements and a lot of paperwork involved. Even after completing the process, borrowers will have to wait for a long time before they receive funds and utilize them.

LLC Unsecured Loans:

If you do not prefer providing your valuable assets as security for loans or if you have no such assets, you can opt for an unsecured LLC loan. These loans do not require any collateral to qualify, however, the business loan interest rates will be slightly higher.

LLC Invoice Factoring:

Also known as Invoice Discounting or Bill Discounting, this is a way to offset the impact of outstanding receivable amounts on your cash flow. Every business has to deal with non-paying or slow-paying customers. When friendly phone calls or cold emailing does not work, invoice factoring can be a great idea. Here, the lender pays you approximately 80% of the value of your unpaid invoices and reminds you once those payments are collected.

Additional Read: Top Things to Consider in Order to Get Your Business Loan Approved In 1 Go

Choose Tata Capital to Be Your LLC Loan Partner!

Be it paying off debts and disbursing salaries or upgrading infrastructural facilities, you can trust Tata Capital to be your complete financial partner. You can now avail of easy loans at competitive rates, flexible repayment terms, and minimal documentation. User-friendly features like business loan EMI calculators make your loan budgeting super convenient. Start your journey with Tata Capital today!

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